SYDNEY ALLEN LIQUIDATOR SET TO TAKE DIRECTORS TO COURT

The liquidator of former high-profile NSW print business Sydney Allen, which went down with debts of $7.6m six years ago, is seeking to take its former directors to court, claiming the company was trading while insolvent, and says it is aiming to get unsecured creditors up to 57c in the dollar.

Liquidator John Morgan will shortly commence legal proceedings that allege Sydney Allen Print, whose director was John Mangos, and Sydney Allen Manufacturing, whose directors were Mangos and Chris Wallace, traded while insolvent for two years, until the companies' demise in April 2016. It will also allege that the directors of MacMillan Investment Holdings were part of that for the last year, when it had what the liquidator alleges were “shadow directors” in the business.

Unsecured creditors are owed $4.27m in total by both Sydney Allen Printing ($3.24m), and Sydney Allen Manufacturing ($1.03m). Secured creditors include MacMillan Investment Holdings, which is owed $1.8m.

The liquidator has provided an affidavit detailing the estimated gross insolvent trading quantum, costs and creditor claims. That affidavit provided for an estimated $4.5m recovery on an “optimistic recovery basis” against John Mangos and Chris Wallace after an insolvency date of 7 April 2014, and a recovery of $3.65m on a “pessimistic recovery basis” against the directors of MacMillan Investment Holdings for debts from 25 March 2015 to 7 April 2016.

The liquidator says there are three possible outcomes from its current proceedings, with creditors to be repaid either on a ‘pessimistic cents in the dollar basis’, in which case no-one will get anything, or a ‘low cents in the dollar’ basis in which case priority creditors – which includes the government with its $1.3m FEG payout – will get all their money back, while unsecured creditors will get up to 36.9c in the dollar, or a ’high cents in the dollar’ basis in which case the priority creditors get all their money back while unsecured creditors will receive up to 57.3 cents in the dollar.

The liquidator has already managed to have the court order that Sydney Allen Print and Sydney Allen Manufacturing be pooled together for the purpose of paying creditor claims. The order means that the assets and liabilities of the two companies are considered as one for creditors purposes. At the same time the third defendant, McMillan Investment Holdings (MIH), sought to and was joined as a defendant to the proceedings, and opposed the relief sought by the plaintiffs. In the court judgement Justice Rares ordered MIH to pay the liquidator’s costs. MacMillan Investment Holdings has filed an appeal against the orders made by the judge, with that appeal set to be held in May.

The liquidator is being largely funded by the government’s attorney general’s department, which is aiming to get back the $1.3m it paid out under the FEGs scheme to Sydney Allen employees. The funding from the attorney general has so far totalled $806,000, and has allowed the liquidator to obtain what he says is "detailed and forensic evidence" to support his case, which he says has come in the main from "extensive public examinations." The liquidator has shelled out $811,000 in legal fees so far, and charged $254,000 in his own fees. Total paid out by the liquidator in pursuit of the funds has been $1.2m.

He has already been granted an extension to pursue his claims. The liquidator is now seeking approval from creditors for further remunerations to itself of $101,000 and $21,000 for work already completed, and a further $35,000 and $45,000 for work to the end of the liquidation.

Sydney Allen went down at a time of turmoil for the Sydney offset print trade, with Good Impressions - whose building Sydney Allen moved into – and Lyndsay Yates among other high-profile casualties, with Lindsay Yates also ultimately dragging Melbourne trade printer Whirlwind into liquidation after its ill-fated purchase of the business.

There is a great deal of sympathy for John Mangos and Chis Wallace within Sydney print circles, who many feel did their best to manage a good businesss through trying times, and now find themselves caught up in a legal nightmare.